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Interns and the Fair Labor Standards Act
Jim Juliano - Spring 2008

Does your team employ students as interns? Do you have to pay them minimum wage? Do you have to pay them at all?

As wage and hour complaints for violation of federal law continue to increase (and your state may have a separate track for remedies in case of a state law violation), a brief review of requirements and exemptions might help save you time and money.

The Fair Labor Standards Act (FLSA) governs numerous wage and hour issues, including minimum wage (currently $5.85 per hour; $6.55 per hour effective July 24).

An employer that hires an intern generally must pay minimum wage and comply with the FLSA’s other wage and hour requirements. In two situations, however, an employer may justify paying nothing to the intern. There also are circumstances in which an employer may pay less than minimum wage.

When an employer does not have to pay

An intern does not have to be compensated if he or she is not considered an employee or the employer is exempt.

This applies primarily to students who intern at businesses. The internships are intended as temporary training exercises or learning experiences, and the students are supervised by members of their schools’ faculties.

The U.S. Department of Labor’s Wage and Hour Division, borrowing heavily from the U.S. Supreme Court’s reasoning in Walling v. Portland Terminal Co., requires that all of the following criteria be met for an intern to be considered outside of the FLSA:

  • The training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school.

  • The training is for the benefit of the trainees or students.

  • The trainees or students do not displace regular employees, but work under regular employees’ close observation.

  • The employer derives no immediate advantage from the activities of the trainees or students, and on occasion his/her operations actually may be impeded.

  • The trainees or students are not necessarily entitled to jobs at the conclusion of the training period.

  • The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

An employer may be exempt from the FLSA if it is an amusement or recreational establishment (such as a baseball team) and either (1) operates for seven or fewer months in a year or (2) has average receipts for any six months of the preceding calendar year that were not more than one-third of its average receipts of the other six months of the year.

Note that it is permissible to compare the monthly average of receipts for the six smallest-grossing (nonconsecutive) months to the average of the six highest-grossing months in a calendar year.

Although an employer might think it is easy to meet this test, courts look at many details and have reached varied conclusions. In some cases, courts have granted exemptions for baseball teams; in others, exemptions have been denied.

We do not recommend relying upon either of these situations without seeking legal advice. The remedies for violating federal or state law will likely be far more expensive than the cost of paying the minimum wage in the first place.

When an employer can pay less than minimum

The FLSA also permits the employment of certain individuals at wage rates below the minimum wage with certificates issued by the Department of Labor. They are:

  • Student learners (vocational education students).

  • Full-time students in retail or service establishments, agriculture or institutions of higher education.

  • Individuals whose capacities for the work to be performed are impaired by physical or mental disabilities, including those related to age or injury.

Employers must keep records on wages, hours and other information under Labor Department regulations. Most of this data is the type that employers generally maintain in ordinary business practice. See http://www.dol.gov/compliance/guide/minwage.htm for more information.

The rules may be complicated, and state laws may vary, so legal advice is recommended.

Alison C. Healey contributed research and analysis for this article.

 
 
 
 
 

This website contains general information that should not be considered legal advice or legal opinion concerning individual situations. Legal counsel should be consulted for specific advice.

Copyright 2008 by L. James Juliano Jr.
Legally Speaking® is a registered trademark of the law practice of L. James Juliano Jr.